9043 / Are there any circumstances that allow a small business taxpayer to change its accounting method without IRS approval?

Yes. The IRS has released guidance providing that small business taxpayers (see below) may make certain tangible property changes in methods of accounting in order to take into account only amounts paid or incurred, and dispositions made, in tax years beginning on or after January 1, 2014. For the tax year beginning on or after January 1, 2014, small business taxpayers are permitted to make such changes without filing Form 3115.¹

For purposes of this exception, a “small business taxpayer” is a taxpayer with one or more distinct trades or businesses that has:

(1)  Total assets of less than $10 million as of the first day of the tax year for which a change in accounting method under the final tangible property regulations and related guidance is effective; or

(2)  Average annual gross receipts of $31 million in 2025 ($30 million in 2024, $29 million in 2023, $27 million in 2022, $26 million in 2019-2021, $25 million in 2018 and $10 million prior to 2018) or less for the prior three tax years.

This exception applies only to small business taxpayers electing to make changes in accounting methods in order to prospectively apply the final tangible property regulations. While these taxpayers are still permitted to file the Form 3115 in order to make this change, the IRS guidance allows small business taxpayers to simply make the change on a federal income tax return. This guidance is meant to ease the burden of changing accounting methods for small business taxpayers by effectively allowing them to make the change on a cut-off basis.

If a small business taxpayer has already filed a Form 3115 with respect to accounting changes applying the tangible property regulations, the taxpayer may withdraw the form by filing an amended return on or before the due date of the original tax return (including extensions).²